I am considering retiring at my present age of 59, and like so many others I am considering the problem of what I can withdraw from my portfolio to finance my retirement. As I read the discussions on what percentage of one's portfolio can be "safely" withdrawn, I am struck by how many people seem to be planning their retirement strategies based on the assumption (or fear)that they may live to be 85, 90 or more. And having assumed that, they then crunch inflation rates, market returns and a host of other things, all aimed at insuring that they will not, under any circumstances, run out of money before they die at the ripe old age which has been assumed.

Now I will grant you that if you are in reasonably good health and retire at a relatively young age, you may have to live off of your assets for 30 or even 40 years. And you may be as physically and mentally fit at 85 as you were at 65. However, that is only one scenario, and as I read the discussions I am equally struck by how little consideration seems to be given to the other scenario, which is that you die in your sixties or seventies. Or, ten years down the road you cannot do the things you can do now, for whatever reason.

I am, as I said, 59, and I have a portfolio of $1,000,000, a nice house on the Chesapeake Bay, some toys and no debt. That makes it feasible that I could retire, but my portfolio is not so great that it becomes a shoo-in. I am, as far as I know, in reasonably good health; however, I need only look at the obituaries and consider friends of mine who are already gone to realize that I may have only 10-15 years to live (or less). Or, I may have only 10-15 "good" years, meaning years in which I can do what I do now. Some would say that I should hang in there for a few more years to increase my nest egg, to insure that I shall have enough to make it comfortably to 90. Others would say under no circumstances withdraw more than 5%, or you might run out of money before you die. However, I have to wonder what sense it makes to put such emphasis on the possibility of living to 85 or 90 when it is also quite possible that I shall die or be disabled before 75. Put slightly differently, it makes more sense to me to focus on my life for the next 10-15 years than it does to orient everything around the years after that, even if I do wind up eating cat food.

So I am puzzled. I do not propose to simply blow it all on the assumption that I may die in 5 years, but I am puzzled by the apparent tendency to assume the other extreme and subordinate everything to the possibility that one will live to be 90. Maybe you will, maybe you won't. Notwithstanding the mortality tables which say you might live to 90, when it comes to discussions on when and how to retire I am puzzled by the lack of comment on the fact that you may only have a few years, with something to be said for concentrating on them, not on the other end.

Good question. Everyone's decision is personal, but here's my reasoning and feeling.

I'm planning to preserve the purchasing power of both my after-tax budget and my retirement funds as nearly level as possible, from now at age 60 to age 95. Why so cautious?

• My stubbornness or defiance or something. Our tax system is highly anti-capital and I want to see if it's possible for me to conserve the capital despite that.

• My pride, which makes me unwilling to depend financially on any one else if I can possible avoid it. I'd rather leave behind unspent money.

• After those several decades of living below my means and recent booming stock markets, I don't have especially expensive tastes and it's easy to live on 3% to 4% withdrawals. In fact, I recently got almost a year behind in spending my allocated withdrawals.

• There is an ancient naval principle -- Preserve your maneuvering room! Accordingly, I'm keeping the principal intact in case something expensive comes along that I really, really want to buy (medical treatment not covered by insurance, maybe) or that I am forced to pay for, like a severe market crash or the confiscation of my social security benefits.

• Your point about premature death is well made. Most of the men in my family have died younger than I am now. So, I indulge myself -- trips, gadgets, and now a new house, stepping up from an old one. It all fits inside those modest withdrawals.

• It's not clear that becoming disabled would reduce my spending. I'd travel less but hire more personal help. Might be about even. I keep promising myself that if ever I can't drive safely anymore, I will use taxies rather than succumb to cabin fever or depend on other people.

• I am highly averse to cat food, although my dogs love it.

• I plan to leave most of the remaining assets to a tax-exempt foundation whose work I support. One of its important projects is educating people on how each representative and senator actually votes and the costs of those votes, to compare with the campaign promises.

I plan to retire at the end of this year at age 58. Am planning for 20 years, which is my life expectancy according to the experts. At the end of twenty years, I will be able to live reasonably well without having to fight over the Friskies with my cat, or I may be living well enough to have the butler fight the cat for the food. It all depends on my investments and the market.

I suggest you go to one of many sites that can figure your life expectancy, and plan from there. Good luck.

The only certain thing in life is....we are all going to die. The only uncertain thing about our death is....when it's going to happen!!! That's why deciding how much to withdraw during retirement is a highly personal and difficult decision. Some people's fear of running out of money during retirement is great, other's want to enjoy the money while they're young and have good health.

But what adds to the difficulity, not only do we have to be concerned with getting a decent return on our investments, but also the insidious impact of inflation and taxes in the years ahead.

You should never underestimate the impact of inflation. The average cost of a car 20 years ago was about $8,000. Today, the average cost of a car is roughly $22,000 (if you're lucky). In other words, the average cost of a car has almost tripled in 20 years. Assuming the past 20 years is a good indicator of the next 20 years, we can assume the car that sells for $22,000 today, is going to roughly triple, to around $60,000, in 20 years. And the cost of a pair of shoes, a Big Mac, green fees, etc. could triple as well.

So, most retirees are not just hedging for the possibility of living to a ripe old age, but also being able to pay for and enjoy some of the finer things life will have to offer in the years to come.

And then when you factor in the vagaries of the stock market.....consider that between 1968 and 1982, the stock market averaged around 3% a year....I think that's why most people tend to hope for the best but prepare for the worst.

hharri----- Everyone should have your problem! Wouldn't be a problem for me. Go to liquid with your 1 mil, invest in money market or CDs, live off $65K a year, then at age 65 Social Security kicks in, another $15K-20K annually. Play golf, go fishing, take vacations, buy a new car every 2-3 years, live happily everafter. Forget the market. And then, when your time comes to go off into the old happy hunting ground, leave the 1 mil to your children, or charity, or whatever. People seem to make big problems where no problem exists.

hharri: "I am considering retiring at my present age of 59, and like so many others I am considering the problem of what I can withdraw from my portfolio to finance my retirement. As I read the discussions on what percentage of one's portfolio can be "safely" withdrawn, I am struck by how many people seem to be planning their retirement strategies based on the assumption (or fear) that they may live to be 85, 90 or more. And having assumed that, they then crunch inflation rates, market returns and a host of other things, all aimed at insuring that they will not, under any circumstances, run out of money before they die at the ripe old age which has been assumed."

It sounds like you have some familiarity with the Trinity study that one of the posters referenced. If you have not already done so, you may wish to check out The Retire Early board here on TMF (in Speakers' Corner) and should check out the Retire Early Home Page (which is maintained by "intercst") at":

"Now I will grant you that if you are in reasonably good health and retire at a relatively young age, you may have to live off of your assets for 30 or even 40 years. And you may be as physically and mentally fit at 85 as you were at 65. However, that is only one scenario, and as I read the discussions I am equally struck by how little consideration seems to be given to the other scenario, which is that you die in your sixties or seventies. Or, ten years down the road you cannot do the things you can do now, for whatever reason."

This is a very personal decision. I suspect that it is driven as much by fear, as anything else. While dying just as the last dollar is spent sounds appealing, we generally do not know when we will die, and outliving one's money is the least appealling alternative. Thus, it is a form of "worst" case planning.

In addition, the idea of re-entering the work force at 85 after 20 or 25 years retirement is not at all appealing to most people, and is probably not very feasible (at least with respect to the very well paying professions or executive jobs).

"I am, as I said, 59, and I have a portfolio of $1,000,000, a nice house on the Chesapeake Bay, some toys and no debt. That makes it feasible that I could retire, but my portfolio is not so great that it becomes a shoo-in. I am, as far as I know, in reasonably good health; however, I need only look at the obituaries and consider friends of mine who are already gone to realize that I may have only 10-15 years to live (or less). Or, I may have only 10-15 "good" years, meaning years in which I can do what I do now."

Or you could be in a car accident tomorrow; or maybe 30+ really good years. I have a great uncle who is 92+, still lives in his own home and takes care of his daily needs (but does hire out most maintenance work), still drives himself wherever he needs to go, and carries on pretty much as he has for the last 20 years.

What you did not mention at all is your budget or expected retirement budget. Alot of people would be long gone at your age and with your portfolio, but that is not feasible if you are accustomed to, and plan on continuing, a 200k budget. Actually there was an extended thread on The Retire Early board, quite some time ago, about how to measure and adjust a full-time work budget to a retired and not working budget; you can search for the thread, if you are interested (or maybe intercst will post the link).

Depending upon your numbers, you might divide your portfolio into to portions - one that would sustain minimally acceptable budget indefintitely and one that would support and could be consumed over the next 15 years to support the early extras while still young and healthy.

For example, 750k invested long-term (28k annual income at 4%, which could probably be inflation adjusted each year) and 250k in an immediate annuity with a 15 year payout (I do not know how much income this would generate - but am guessing 28-30k) to increase current income for next 15 years. (Yes, I am aware that TMF generally is down on annuities, and you would be signing away the upside, too). Thus, current income would be in the 56k starting range year 1, with some inflation adjustment - or 5.6%, substantially larger than the 4% safe rate. Just a theoretical idea.

Income would bump up some when SS kicked in, and then would bump down in 15 years, but with the inflation adjustment on the long term money, might be in the 40-48k range (I am too lazy to inflate 28k at 3%, and than at 4%, for a check on my estimate).

"Some would say that I should hang in there for a few more years to increase my nest egg, to insure that I shall have enough to make it comfortably to 90. Others would say under no circumstances withdraw more than 5%, or you might run out of money before you die. However, I have to wonder what sense it makes to put such emphasis on the possibility of living to 85 or 90 when it is also quite possible that I shall die or be disabled before 75. Put slightly differently, it makes more sense to me [emphasis added by JAFO] to focus on my life for the next 10-15 years than it does to orient everything around the years after that, even if I do wind up eating cat food."

It is your decision to make, as long as you are willing to live with the consequences of your decision. But the same issue was true, to a certain extent when you were 25, you could have died in a car accident (or Vietnam) or anywhere else. The only thing that has changed is the probability.

If you check the mortality tables and conclude that your "expected" span is 15 more years, remember that for every current 60 year old who dies at 61 there will need to be a corresponding 60 year old who lives to 90. IOW, the deaths of current 60 years olds will be distributed over some kind of bell curve with the mean death at 75 (per hypothetical). You might also factor in family history and your personal health and medical history to adjust the so-called norm.

"So I am puzzled. I do not propose to simply blow it all on the assumption that I may die in 5 years, but I am puzzled by the apparent tendency to assume the other extreme and subordinate everything to the possibility that one will live to be 90. Maybe you will, maybe you won't. Notwithstanding the mortality tables which say you might live to 90, when it comes to discussions on when and how to retire I am puzzled by the lack of comment on the fact that you may only have a few years, with something to be said for concentrating on them, not on the other end."

Are you arguing for Carpe Diem, Seize the Day --- Live Well, Party HArd, Die Young, Leave a pretty corpse? <grin>

A maxim we have all heard is expect the best, but plan for the worst. In terms of budget (and budget only), the worst is a long life.

Great question hharri! I have been thinking about writing a post on just this subject. I have wondered with you:"I am puzzled by the lack of comment on the fact that you may only have a few years, with something to be said for concentrating on them, not on the other end"

I believe that this whole question boils down to risk management. We have a "back-side" risk (running out of money before we run out of life) and a "front-side" risk (working for more years than we really needed to, and thus depriving ourselves of that time being spent in more fulfilling pursuits).

The trick is to balance the risk. Attempting to eliminate one of these risks at the expense of the other can be taken to an extreme, in either direction. Consider the 18-year-old with $500 bucks in his/her pocket. "Forget about tomorrow, it may never come. Live for the day!". Chances are, tomorrow WILL come for him/her. This is irresponsible behavior.

On the other side, consider the individual saving for retirement. He/she obtains a portfolio large enough to cover the likely time frame they will live, but does not feel "safe" enough. They continue to work in order to provide for events they will most likely NOT encounter. They sacrifice, with 100% certainty, time now for a statistically UNLIKELY event that may occur in the future. This, in my opinion is just as irresponsible as the 18-year-old.

I think most retirees, especially early retirees, have the attitude you describe because we are masters of delayed gratification. We forget that the process of saving was an end to a means, not a means in itself. We fear that in the unlikely event we do run out of money, we have somehow failed in our objective. We have not!

Our objective is to enjoy life, but to do so responsibly (not at the expense of charity, government programs, etc.). By delaying our retirement until we have absolute certainty we will never run out of money, we are acting in direct conflict with our objective (unless we never wanted to retire in the first place)! As I say, the trick is to identify when the effort (in terms of life energy) to reduce the "back-end" risk exceeds the likely benefit (i.e when the front-end risk exceeds the back-end risk).

I for one am willing to accept a (smallish) possibility that my funds will not last forever. In return for accepting this small risk, I obtain the nearly certain (I may die tomorrow) benefit of spending several more years being retired, doing what I really want to be doing. I believe I have the responsibility to myself and to my family to act this way.

oops, typed very fast because I was running out the door... instead of We forget that the process of saving was an end to a means, not a means in itself, meant to say We forget that the process of saving was an ,b>means to an end, not an end in itself

"Life is unpredictable but in the end is right"--Green Day from Good Riddence

The best you can do is, look at your own health, family tree, remember that medicine is making advances, and take your best guess.

My only example is my Granny. When she turned 80, the family through a big birthday party. A couple years ago, we through one at 90. To a certain extent, I'm already planning one for 100. But her leason is not in longevity, but in enjoying the ride. She didn't have much materially, but spiritually and socially, she had millions. That's what our "balance" should be, creating and doing outside of ourselves.

So I am puzzled. I do not propose to simply blow it all on the assumption that I may die in 5 years, but I am puzzled by the apparent tendency to assume the other extreme and subordinate everything to the possibility that one will live to be 90. Maybe you will, maybe you won't. Notwithstanding the mortality tables which say you might live to 90, when it comes to discussions on when and how to retire I am puzzled by the lack of comment on the fact that you may only have a few years, with something to be said for concentrating on them, not on the other end.

Well, others have said this with far more supporting data and arguably more elegantly, but here goes anyway.

To me it boils down to a choice between living within the means of my portfolio (and leaving the leftovers to charity when I eventually die) or living more for the moment (and praying I die before I end up scrounging through garbage for enough beer bottles to recycle to buy catfood).

Seeing as how the only way to build up the portfolio is to put the concept of "delayed gratification" into action in the first place, I don't think the choice will be that hard to make.

I'm still working (for how long due to health reasons is a separate question), but my goal is in the neighborhood of 25-30 times my current expenses. That excludes my mortgage (that I hope to have paid off in time), and all the money I'm putting aside towards retirement. I figure that's enough to reasonably ensure my current lifestyle, including adjustments for inflation and taxes, for as long as I might live, regardless of how long that is. And the growing principal will then be donated to the charities of my choice allowing me to do one final good, even in death.

But that's were my mind is. As others have said, it's a personal decision. If you want to focus on today at the expense of a possible tomorrow, that's your choice to make. Me, I'm betting on life.....

I am, as I said, 59, and I have a portfolio of $1,000,000, a nice house on the Chesapeake Bay, some toys and no debt. That makes it feasible that I could retire, but my portfolio is not so great that it becomes a shoo-in. I am, as far as I know, in reasonably good health; however, I need only look at the obituaries and consider friends of mine who are already gone to realize that I may have only 10-15 years to live (or less). Or, I may have only 10-15 "good" years, meaning years in which I can do what I do now. Some would say that I should hang in there for a few more years to increase my nest egg, to insure that I shall have enough to make it comfortably to 90. Others would say under no circumstances withdraw more than 5%, or you might run out of money before you die. However, I have to wonder what sense it makes to put such emphasis on the possibility of living to 85 or 90 when it is also quite possible that I shall die or be disabled before 75. Put slightly differently, it makes more sense to me to focus on my life for the next 10-15 years than it does to orient everything around the years after that, even if I do wind up eating cat food.

So I am puzzled. I do not propose to simply blow it all on the assumption that I may die in 5 years, but I am puzzled by the apparent tendency to assume the other extreme and subordinate everything to the possibility that one will live to be 90. Maybe you will, maybe you won't. Notwithstanding the mortality tables which say you might live to 90, when it comes to discussions on when and how to retire I am puzzled by the lack of comment on the fact that you may only have a few years, with something to be said for concentrating on them, not on the other end.--------------------------------------------------------------------------------------------------------------------The fact that you have accumulated $1,000,000 in wealth during your working career suggests to me that, unless you have earned exorbitant salaries, your retirement savings have probably come by self sacrifices, compromises and a little penny pinching and a lot of will power or a combination of them all. You don't need to be a mathematician to realize that this amount of money earning a conservative 10% per annum performance will provide you with portfolio growth of $100,000 a year. With no debt and a retirement home in place, how much, in your opinion, is enough? I plan to retire at 55 with a similar amount and would still retire if the value was half that. Point being, my sacrificing, compromising and "doing without" will end at age 55. It will then be time to enjoy the benefits of my savings and not having to worry about being able to afford this or afford that. Retire and enjoy the remainder of your life, life is to short, especially at age 55...or 59

I am, as I said, 59, and I have a portfolio of $1,000,000, a nice house on the Chesapeake Bay, some toys and no debt. That makes it feasible that I could retire, but my portfolio is not so great that it becomes a shoo-in.

I am curious to know the answer to this question. How many or what percent of the US Polulation accumulate at least $1,000,000 by age 59 (or even 65 for that matter)? I am sure there is a Web Site that has the answer. Can someone point me to it?